UniSuper, the $60 billion superannuation fund for Australia’s higher education and research sector, has internalised the management of its Global Environmental Opportunities (GEO) fund, adopting an active management approach using the MSCI ESG Research Sustainable Impact Metrics database.
The GEO option is designed to provide members with a way to invest in companies that deliver solutions to environmental challenges, with a focus on alternative energy, sustainable water, green building, pollution prevention and clean technology.
GEO has been a passively managed investment option since inception in 2012. However, UniSuper recently made the decision to internally manage the GEO option adopting an active investment management approach. The Fund will seek to maintain an average environmental revenue target—from one or more of the key themes—of greater than 75%, delivering a more ‘true to label’ offer for members.
The internalisation and active management of this option will also deliver the added portfolio construction benefits of reduced stock concentration, better liquidity management, more active stock selection as well as a more active approach to ESG risk management during the portfolio construction process.
With a fee of 0.36% p.a., GEO remains one of the lowest cost options amongst peers in the market.
A growing appetite for ESG investment options
While ESG is considered across all UniSuper investment decisions, GEO is one of three dedicated sustainable investment options offered by UniSuper, who has seen ongoing demand from members for investment options that align to individual’s sustainable, environmental and governance beliefs.
“Our members are unique, they are highly educated, deeply engaged and can be focused on the impact of their investment choices and broader environmental issues,” said Talieh Williams, UniSuper Manager of Governance & Sustainable Investment.
“GEO is a good example of an investment option that provides our members with a way to align their retirement savings with their interests and beliefs.”
The portfolio will be constructed using data from the new MSCI ESG Research Sustainable Impact Metrics database which quantifies revenue from key environmental thematics, allowing UniSuper to identify suitable stocks for the portfolio.
MSCI made the database publicly available in late 2016. UniSuper will be the first Australian superannuation fund to use the data for portfolio construction.
“Our sustainable impact database looks to map the UN Sustainable Development Goals to actionable investment themes across five key areas – basic needs, empowerment, climate change, natural capital and governance,” said Michael Anderson, head of client coverage, Australia at MSCI.
“By providing tools and data for up to 8,500 companies, institutional investors are able to better measure their alignment to social and environmental factors.”
UniSuper was one of the first profit-to-member superannuation funds to embrace the shift to in house asset management and now internally manages more than 60% of its member’s money across all asset classes, and currently has 45 investment specialists in house.